Adversarial advisers must rethink claim management

Public perceptions of the insurance industry remain overwhelmingly negative, with financial advisers – often inadvertently – complicit in what new research suggests is significant gap between consumer expectation of the claims process and the reality.

The Value of Protection: Creating an advocate for life, a white paper commissioned by the Association of Financial Advisers (AFA), focuses on client perceptions of the life insurance industry, singling out income protection insurance to examine the expected outcome when lodging a claim.

These are then compared to real experiences.

The research concluded that while underinsurance in Australia is undoubtedly complex and multifaceted, the lack of consumer trust in the insurance industry is “a significant contributing factor”.

Confused consumers

For the most part this is an issue that insurance companies need to address, with AFA chief executive Brad Fox suggesting even radical measures such as a complete change of terminology might be required.

While financial advisers can provide clarity on the sort of cover needed and products available, the research found that some are loathe to facilitate a direct relationship between the client and the insurance company. Instead the prevailing advice to clients wishing to make a claim is often “come to me and I’ll make the buggers pay”.

But do advisers who build claims management into their value proposition really have an edge?

“Advisers need to recognise that a collaborative approach with the insurer rather than a combative approach will be perceived more positively by their client,” states the white paper.

“The consumer needs confidence that the insurer will deliver on the promise of the contract, and it is the adviser’s role to build that confidence from the time of sale, throughout the life of the policy, and most definitely at claim time.

“Behaviour that promotes the adviser as ‘keeping the insurer to their promise’ has the potential to erode consumer confidence and is counter-productive to building long-term perceptions of trust in insurance.”

Factors such as a negative media focus and an adversarial approach to claims were cited by both advised and direct insurance consumers as reasons for their mistrust but a perceived lack of transparency around insurance products is perhaps the most telling.

Specifically, consumers are confused about the ownership structure of insurance companies, which leads to concern regarding product pushing and conflicted remuneration.

Or as one advised consumer put it: “There are a few big companies owned by even bigger companies. You don’t necessarily know who you are dealing with.”